We are given that $AB$ is a chord of the larger circle that touches the smaller circle at $C$. Since $AB$ touches the smaller circle at $C$, the radius $OC$ is perpendicular to $AB$. This means $OC$ bisects $AB$ at $C$.
Let $AB = 2x$, so that $AC = x$. In right triangle $OCA$, using the Pythagorean theorem:
$OA^2 = OC^2 + AC^2$
Substituting the given values:
$(3.5)^2 = (2.1)^2 + x^2$
$12.25 = 4.41 + x^2$
$x^2 = 12.25 - 4.41 = 7.84$
$x = \sqrt{7.84} = 2.8$
Since $AB = 2x$, we get:
$AB = 2(2.8) = 5.6$ cm